Climate investment: burden or benefit for the poor?

Community members work on a small hydro installation as part of the Small Grants Programme in the Dominican Republic.

In this blog series, UNDP experts and practitioners share their perspective on issues of climate change, in the lead up to COP21 in December.

Over time, most arguments against climate action have been pushed to the margins—we now have widespread acceptance of climate change’s threats and impacts, as well as an understanding of the mitigation and adaptation measures that need to be taken. However, one argument has stubbornly remained: that the issue is simply too costly to address.

Thankfully, this thinking is starting to change. Technological advances, a better understanding of the relationship between energy access and poverty, and the importance of off-grid, low carbon solutions have all helped show that climate action is not a burden, but rather an essential aspect of poverty reduction. Indeed, prominent development thinkers argue that low carbon development is itself a path to growth.

Measures intended to mitigate climate change actually bring about other benefits, now widely called “co-benefits”. In his latest review, Dr. Nicholas Stern argued that if co-benefits beyond avoided climate change impacts were formally accounted for, many emissions reductions measures would be worth implementing for their own sake. Gold Standard Foundation found that its small scale projects deliver additional outcomes beyond avoided emissions that are worth billions of US dollars.

These ideas inspired me to take a closer look at our climate change portfolio. Given that the bulk of UNDP GEF Small Grants Programme (SGP) projects are small in scale and target poor communities, we often struggle to capture the global impacts of our initiatives. This is particularly true of climate change interventions, since, until recently, the main indicator of success was emissions avoided (which didn’t amount to much for small projects in communities that do not produce high emissions in the first place).

I (along with SGP intern Song Ni) decided to use this co-benefits focused approach to estimate the true impact of our investment. Over 4,000 climate change projects were supported by SGP over 20 years, historically around 60 percent of them focusing on community solutions in renewable energy and energy efficiency.

For this pilot study (which is still ongoing), we selected three initiatives involving different low carbon technologies: solar energy for water heating in Jordan; energy efficient cook stoves in Nicaragua and micro hydro systems in Dominican Republic. We found that projects generated co-benefits that far exceeded initial SGP investment.

For example, the annual co-benefits of the Jordanian project were found to be US$158,926 (compared to SGP’s investment of $23,000). The benefits included $11,520 in employment, $69,548 in financial savings for the community, $61,177 in time savings from wood collection, and $16,681 in estimated benefits of forest conservation.

In Nicaragua, the co-benefits generated in the first year alone amounted to $56,185, including labor, financial, and time savings compared to the initial SGP investment of $4,560.

When we looked at the cumulative impact of community interventions in the Dominican Republic—where 37 community micro hydro systems were put in operation since 1997—our preliminary estimation of co-benefits amounted to $7,891,280, including employment, financial savings and biodiversity conservation.

In the coming years we plan to focus more rigorously on capturing social, economic and environmental co-benefits to estimate the true value of climate investment in our community projects portfolio. What is clear already is that climate change mitigation initiatives are achieving socio-economic impacts related to sustainable development and poverty reduction.

With the discussion of co-benefits now here to stay, we hope that the lessons from our program will help mainstream the understanding that, in addition to averting catastrophes, climate change mitigation provides opportunities to reduce poverty.

In the lead-up to the COP21 Paris climate change conference, UNDP's experts and practitioners highlight the challenges and opportunities in addressing this global concern. For more information, visit http://www.undp.org/cop21